EXECUTIVE OFFICE OF THE PRESIDENT

OFFICE OF MANAGEMENT AND BUDGET

WASHINGTON, D.C. 20503
September 28,2012
M-12-19
MEMORANDUM FOR THE CHIEF FINANCIAL OFFICERS AND SENIOR
PRocuREMENT EXECUTIVES OF EXECUTIVE DEPARTMENTS AND AGENCIES
FROM:
F FEDERAL FINANCIAL MANAGEMENT
JOSEPH G. JORDAN
ADMINISTRATOR
SUBJECT: Guidance on Allowable Contracting Costs Associated with the Worker
Adjustment and Retraining Notification (WARN) Act
The Worker Adjustment and Retraining Notification (WARN) Act, 29 U.S.C. 2101-2109,
gen.erally requires employers with at least 100 employees to provide written notice to affected
employees 60 days before ordering certain plant closings or mass layoffs if they are reasonably
foreseeable. On July 30, 2012, the Department of Labor (DOL), which is the Federal agency
responsible for administering the WARN Act, issued Training and Employment Guidance Letter
No. 3-12 adciress"ing the WARN Act's requirements in the context of the potential across-the
board budgetcuts (known as sequestration) scheduled to occur on January 2, 2013 if Congress
fails to act. DOL concluded that it is neither necessary nor appropriate for Federal contractors to
provide WARN Act notice to employees 60 days in advance of the potential sequestration
because of uncertainty about whether sequestration will occur and, if it did, what effect it would
have on particular contracts, amOlig other factors: In reaching this conclusion, DOL explained
that giving notice in these circumstances would waste States' resources in undertaking
employment assistance activities where none are needed and creaty unnecessary anxiety and
uncertainty for workers. .
Despite DOL's guidance, s.Qme contractors have indicated they are still consideri,ng issuing
WARN ACt notices, and have inquired about' Federal contracting agencies would
cover WARN Act-related costs in connection with the potential sequestration. To further
minimize the potential for waste and disruption associated with the issuance of unwarranted
layoff notices; this memorandum provides guidance of certain liability
litigation costs with WARN Act compliance. Specifically, if (1) sequestration
occurs and an agency terminates or modifies a contract that necessitates that the contractor order
&
a plant closing or mass layoff of a type subject to WARN Act requirements, and (2) that
contractor has followed a course of action consistent with DOL guidance; then any resulting
employee compensation costs for WARN Act liability as detennined by a court, as well as
attoroeys' fees and other litigation costs (irrespective of li tigation outcome), would qualify as
allowable costs and be covered by the contracting agency, if otherwise reasonable and allocable.
This guidance does not alter existing rights, responsibilities, obligations, or limitations under
individual contract provisions or the governing cost principles set forth inthe.Fedcral
Acquisition Regulation (FAR) and other appli cable law. Thus, agencies may treat as allowable
other costs potentially associated with sequestration, including WARN Act-related costs arising
under .circumstances not specified .in thi s guidance, based on the usual cost principles of
allocability, al! owabili ty, and reasonableness as set forth in the FAR.